Garanti places ‘ground-breaking’ green-pledge covered with IFC

Garanti Bank has placed a TL530m (Eu134m, $150m) five year covered bond with International Finance Corporation with a commitment to use half the proceeds to offer green mortgages, making it the first such green-orientated transaction in Turkey, according to the issuer.

International Finance Corporation (IFC), a member of the World Bank Group, announced this (Friday) morning that it is investing $150m equivalent in a Turkish lira covered bond from Türkiye Garanti Bankası (Garanti Bank). It said half of the funds invested by IFC will be used by Garanti Bank to provide green mortgages for the purchase of energy efficient housing.

The five year covered bond is backed by residential mortgages, and was issued out of Garanti’s Eu5bn covered bond programme, which was established in 2015 and in April received renewed approval from the Capital Markets Board (CMB) of Turkey.

“Garanti Bank has recorded a ground-breaking transaction with IFC, the first ever residential mortgage covered bond in Turkey to support green mortgages,” said Ali Fuat Erbil, president and CEO of Garanti (pictured, left). “Garanti Bank is reinforcing its support to the sustainable future of Turkey via a $150m equivalent Turkish lira covered bond issuance.”

The Turkish bank expects that its green housing loans portfolio will grow to $100m by the end of 2020.

IFC said the investment came under its strategy in Turkey to provide financing through financial intermediaries and direct investments to scale up energy efficiency projects and sustainable energy finance.

“With this financing, we are addressing some of IFC’s key development priorities in Turkey – climate change, sustainable cities, and capital markets development,” said Marcos Brujis, global director, financial institutions group, IFC (pictured, right). “Diversified and innovative funding instruments in Turkish lira will help to deepen capital markets and increase investor confidence.

“Green mortgages also offer better borrowing rates for customers, while helping to save energy costs.”

VakıfBank is the only issuer to sell a euro-denominated benchmark covered bond out of Turkey to date, a Eu500m five year mortgage-backed issue, in April 2016. Turkish covered bond activity had previously been focused on SME-backed issuance placed with development banks.

Berlin Hyp has sold the only pure green covered bond (see today’s other article), which had green collateral from day one.

Photo credit: IFC

ABN AMRO